ROLLING MEADOWS, Ill., Oct. 27, 2022 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE:AJG) today reported its financial results for the quarter ended September 30, 2022. Management will host a webcast conference call to discuss these results on Thursday, October 27, 2022 at 5:15 p.m. ET/4:15 p.m. CT. To listen to the call, and for printer-friendly formats of this release and the "CFO Commentary" and "Supplemental Quarterly Data," which may also be referenced during the call, please visit ajg.com/IR. These documents contain both GAAP and non-GAAP measures. Investors and other users of this information should read carefully the section entitled "Information Regarding Non-GAAP Measures" beginning on page 9.

Summary of Financial Results - Third Quarter

		Revenues Before						Diluted Net Earnings
		Reimbursements		Net Earnings (Loss)		EBITDAC		(Loss) Per Share
Segment		3rd Q 22	3rd Q 21	3rd Q 22	3rd Q 21	3rd Q 22	3rd Q 21	3rd Q 22	3rd Q 21

		(in millions)		(in millions)		(in millions)

Brokerage, as reported		$ 1,736.2	$ 1,499.7	$ 282.5	$ 253.6	$ 488.5	$ 481.2	$ 1.31	$ 1.20
	Net losses (gains) on divestitures	1.3	(4.3)	1.0	(3.4)	1.3	(4.3)	-	(0.02)
	Acquisition integration	-	-	30.3	4.6	39.5	5.8	0.14	0.02
	Workforce and lease termination	-	-	4.5	3.3	6.8	3.9	0.02	0.01
	Acquisition related adjustments	-	-	(8.8)	24.6	24.2	5.8	(0.04)	0.12
	Amortization of intangible assets	-	-	85.3	70.1	-	-	0.40	0.33
	Levelized foreign currency
	translation	-	(48.8)	-	(5.2)	-	(8.1)	-	(0.02)

Brokerage, as adjusted *		1,737.5	1,446.6	394.8	347.6	560.3	484.3	1.83	1.64

Risk Management, as reported		275.5	248.0	26.9	22.0	47.3	43.7	0.13	0.10
	Workforce and lease termination	-	-	1.7	4.0	2.2	4.5	0.01	0.02
	Acquisition related adjustments	-	-	0.1	(0.1)	0.1	0.1	-	-
	Acquisition integration	-	-	0.5	-	0.6	-	-	-
	Amortization of intangible assets	-	-	1.0	1.6	-	-	-	0.01
	Levelized foreign currency
	translation	-	(3.6)	-	(0.4)	-	(0.7)	-	-

Risk Management, as adjusted *		275.5	244.4	30.2	27.1	50.2	47.6	0.14	0.13

Corporate, as reported		0.3	357.9	(53.1)	(37.0)	(27.1)	(51.5)	(0.25)	(0.24)
	Loss on extinguishment of debt	-	-	-	12.2	-	-	-	0.06
	Transaction-related costs	-	-	5.9	8.2	6.3	11.0	0.03	0.04
	Income tax related	-	-	(7.0)	4.9	-	-	(0.03)	0.03

Corporate, as adjusted *		0.3	357.9	(54.2)	(11.7)	(20.8)	(40.5)	(0.25)	(0.11)

Total Company, as reported		$ 2,012.0	$ 2,105.6	$ 256.3	$ 238.6	$ 508.7	$ 473.4	$ 1.19	$ 1.06

Total Company, as adjusted *		$ 2,013.3	$ 2,048.9	$ 370.8	$ 363.0	$ 589.7	$ 491.4	$ 1.72	$ 1.66

Total Brokerage & Risk
	Management, as reported	$ 2,011.7	$ 1,747.7	$ 309.4	$ 275.6	$ 535.8	$ 524.9	$ 1.44	$ 1.30

Total Brokerage & Risk
	Management, as adjusted *	$ 2,013.0	$ 1,691.0	$ 425.0	$ 374.7	$ 610.5	$ 531.9	$ 1.97	$ 1.77

For third quarter 2022, the pretax impact of the Brokerage segment adjustments totals $146.3 million, with a corresponding adjustment to the provision for income taxes of $34.0 million relating to these items. For third quarter 2022, the pretax impact of the Risk Management segment adjustments totals $4.4 million, with a corresponding adjustment to the provision for income taxes of $1.1 million relating to these items. For third quarter 2022, the pretax impact of the Corporate segment adjustments totals $6.3 million, with a corresponding adjustment to the benefit for income taxes of $7.4 million relating to these items and the other tax items noted on page 7. A detailed reconciliation of the 2022 and 2021 provision (benefit) for income taxes is shown on pages 14 and 15.

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"Our outstanding performance continued during the third quarter! For our combined brokerage and risk management segments, total revenues increased 15%, organic revenues increased 8.4%, we completed 6 new mergers, grew net earnings 12%, delivered adjusted EBITDAC margins in excess of 30%, and most importantly, our client-first culture continues to flourish," said J. Patrick Gallagher, Jr., Chairman, President and CEO. Through the first nine months of the year, revenues have increased 22%, organic growth is 9.8%, net earnings have grown 25% and adjusted EPS is up 20%.

"Our third quarter renewal premium data shows global premium increases approximate 10.5%, a bit higher than the renewal premium change in the first half of the year. Price increases are mostly consistent with recent quarters across nearly all lines of business. Client exposures, including favorable policy endorsements, continue to increase, and new arising claim counts moved higher year over year; these metrics are not reflective of an economic slowdown in our clients' businesses.

"Our talented teams remain focused on what they do best; delivering superior insurance and risk management advice through data driven insights, our vast resources and our niche capabilities."

Summary of Financial Results - Nine-Months Ended September 30,

		Revenues Before						Diluted Net Earnings
		Reimbursements		Net Earnings (Loss)		EBITDAC		(Loss) Per Share
Segment		9 Mths 22	9 Mths 21	9 Mths 22	9 Mths 21	9 Mths 22	9 Mths 21	9 Mths 22	9 Mths 21

		(in millions)		(in millions)		(in millions)

Brokerage, as reported		$ 5,599.5	$ 4,500.1	$ 1,058.5	$ 845.6	$ 1,781.6	$ 1,539.6	$ 4.92	$ 4.09
	Net gains on divestitures	(2.9)	(8.9)	(2.4)	(7.0)	(2.9)	(8.9)	(0.01)	(0.03)
	Acquisition integration	-	-	97.9	12.5	122.3	16.1	0.46	0.06
	Workforce and lease termination	-	-	19.1	11.9	21.1	13.2	0.09	0.06
	Acquisition related adjustments	-	-	(27.2)	41.5	37.7	19.6	(0.13)	0.20
	Amortization of intangible assets	-	-	254.1	230.1	-	-	1.19	1.12
	Levelized foreign currency
	translation	-	(105.4)	-	(17.6)	-	(26.0)	-	(0.09)

Brokerage, as adjusted *		5,596.6	4,385.8	1,400.0	1,117.0	1,959.8	1,553.6	6.52	5.41

Risk Management, as reported		802.0	713.3	79.4	64.9	140.0	131.1	0.37	0.31
	Net gains on divestitures	-	(0.1)	-	(0.1)	-	(0.1)	-	-
	Workforce and lease termination	-	-	2.8	5.0	3.6	5.8	0.01	0.03
	Acquisition related adjustments	-	-	(1.1)	2.0	0.3	0.3	(0.01)	0.01
	Acquisition integration	-	-	1.4	-	1.8	-	0.01	-
	Amortization of intangible assets	-	-	3.4	4.4	-	-	0.02	0.02
	Levelized foreign currency
	translation	-	(9.7)	-	(1.1)	-	(2.0)	-	(0.01)

Risk Management, as adjusted *		802.0	703.5	85.9	75.1	145.7	135.1	0.40	0.36

Corporate, as reported		23.4	921.6	(157.4)	(76.4)	(107.2)	(145.0)	(0.72)	(0.52)
	Loss on extinguishment of debt	-	-	-	12.2	-	-	-	0.06
	Transaction-related costs	-	-	25.6	16.9	27.7	21.2	0.11	0.08
	Income tax related	-	-	(19.0)	24.2	-	-	(0.09)	0.11

Corporate, as adjusted *		23.4	921.6	(150.8)	(23.1)	(79.5)	(123.8)	(0.70)	(0.27)

Total Company, as reported		$ 6,424.9	$ 6,135.0	$ 980.5	$ 834.1	$ 1,814.4	$ 1,525.7	$ 4.57	$ 3.88

Total Company, as adjusted *		$ 6,422.0	$ 6,010.9	$ 1,335.1	$ 1,169.0	$ 2,026.0	$ 1,564.9	$ 6.22	$ 5.50

Total Brokerage & Risk
	Management, as reported	$ 6,401.5	$ 5,213.4	$ 1,137.9	$ 910.5	$ 1,921.6	$ 1,670.7	$ 5.29	$ 4.40

Total Brokerage & Risk
	Management, as adjusted *	$ 6,398.6	$ 5,089.3	$ 1,485.9	$ 1,192.1	$ 2,105.5	$ 1,688.7	$ 6.92	$ 5.77

For the nine-month period ended September 30, 2022, the pretax impact of the Brokerage segment adjustments totals $443.4 million, with a corresponding adjustment to the provision for income taxes of $101.9 million relating to these items. For the nine-month period ended September 30, 2022, the pretax impact of the Risk Management segment adjustments totals $8.7 million, with a corresponding adjustment to the provision for income taxes of $2.2 million relating to these items. For the nine-month period ended September 30, 2022, the pretax impact of the Corporate segment adjustments totals $27.7 million, with a corresponding adjustment to the benefit for income taxes of $21.1 million relating to these items and the other tax items noted on page 7. A detailed reconciliation of the 2022 and 2021 provision (benefit) for income taxes is shown on pages 14 and 15.

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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):

Organic Revenues (Non-GAAP)			3rd Q 2022	3rd Q 2021	9 Mths 2022	9 Mths 2021

Base Commissions and Fees
Commissions and fees, as reported			$ 1,582.9	$ 1,370.0	$ 5,146.1	$ 4,102.1
Less commissions and fees from acquisitions			(161.2)	-	(777.9)	-
Less divested operations			-	(0.1)	-	(2.2)
Levelized foreign currency translation			-	(45.0)	-	(96.1)

Organic base commissions and fees			$ 1,421.7	$ 1,324.9	$ 4,368.2	$ 4,003.8

Organic change in base commissions and fees			7.3 %		9.1 %

Supplemental Revenues
Supplemental revenues, as reported			$ 64.7	$ 61.0	$ 204.7	$ 183.0
Less supplemental revenues from acquisitions			(0.3)	-	(1.4)	-
Levelized foreign currency translation			-	(2.0)	-	(4.4)

Organic supplemental revenues			$ 64.4	$ 59.0	$ 203.3	$ 178.6

Organic change in supplemental revenues			9.2 %		13.8 %

Contingent Revenues
Contingent revenues, as reported			$ 52.4	$ 43.7	$ 167.1	$ 150.3
Less contingent revenues from acquisitions			(0.6)	-	(2.4)	-
Levelized foreign currency translation			-	(0.3)	-	(1.2)

Organic contingent revenues			$ 51.8	$ 43.4	$ 164.7	$ 149.1

Organic change in contingent revenues			19.4 %		10.5 %

Total reported commissions, fees, supplemental
	revenues and contingent revenues		$ 1,700.0	$ 1,474.7	$ 5,517.9	$ 4,435.4
Less commissions, fees, supplemental revenues
	and contingent revenues from acquisitions		(162.1)	-	(781.7)	-
Less divested operations			-	(0.1)	-	(2.2)
Levelized foreign currency translation			-	(47.3)	-	(101.7)

Total organic commissions, fees, supplemental
	revenues and contingent revenues		$ 1,537.9	$ 1,427.3	$ 4,736.2	$ 4,331.5

Total organic change		*	7.8 %		9.3 %


*	As previously discussed, third quarter 2021 revenues were favorably impacted by an estimate change related to revenues generated from our clients' employment levels developing above our January 1, 2021 estimates. Leveling for such, total brokerage organic growth would have been approximately 9% for third quarter 2022.

Acquisition Activity	3rd Q 2022	3rd Q 2021	9 Mths 2022	9 Mths 2021

Number of acquisitions closed *	6	5	19	17
Estimated annualized revenues acquired (in millions)	$ 20.4	$ 16.1	$ 102.7	$ 139.9

* In the third quarter of 2022, Gallagher issued 91,000 shares of its common stock in connection with acquisitions.

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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):

Compensation Expense and Ratios			3rd Q 2022	3rd Q 2021	9 Mths 2022	9 Mths 2021

Compensation expense, as reported			$ 985.8	$ 827.9	$ 3,061.4	$ 2,423.0

Acquisition integration			(25.7)	(4.7)	(81.5)	(11.9)
Workforce and lease termination related charges			(4.4)	(2.0)	(15.9)	(9.3)
Acquisition related adjustments			(24.2)	(5.8)	(37.7)	(19.6)
Levelized foreign currency translation			-	(29.8)	-	(60.6)

Compensation expense, as adjusted			$ 931.5	$ 785.6	$ 2,926.3	$ 2,321.6

Reported compensation expense ratios using reported
	revenues on pages 1 and 2	*	56.8 %	55.2 %	54.7 %	53.8 %
Adjusted compensation expense ratios using adjusted
	revenues on pages 1 and 2	**	53.6 %	54.3 %	52.3 %	52.9 %


*	Reported third quarter 2022 compensation ratio was 1.6 pts higher than third quarter 2021. This increase reflects increased integration costs and a seasonally higher compensation ratio related to the reinsurance operations acquired in December 2021, workforce related charges, and acquisition earnout related adjustments, as well as the resumption of merit wage increases and hiring of producers and other roles to service and support higher organic growth, partially offset by lower incentive compensation and foreign exchange movements.
**	Adjusted third quarter 2022 compensation ratio was 0.7 pts lower than third quarter 2021. This decrease reflects lower incentive compensation offset in part by a seasonally higher compensation ratio related to the reinsurance operations acquired in December 2021, as well as the resumption of merit wage increases and hiring of producers and other roles to service and support higher organic growth.

Operating Expense and Ratios			3rd Q 2022	3rd Q 2021	9 Mths 2022	9 Mths 2021

Operating expense, as reported			$ 261.9	$ 190.6	$ 756.5	$ 537.5

Acquisition integration			(13.8)	(1.1)	(40.8)	(4.2)
Workforce and lease termination related charges			(2.4)	(1.9)	(5.2)	(3.9)
Levelized foreign currency translation			-	(10.9)	-	(18.8)

Operating expense, as adjusted			$ 245.7	$ 176.7	$ 710.5	$ 510.6

Reported operating expense ratios using reported
	revenues on pages 1 and 2	*	15.1 %	12.7 %	13.5 %	11.9 %
Adjusted operating expense ratios using adjusted
	revenues on pages 1 and 2	**	14.1 %	12.2 %	12.7 %	11.6 %


*	Reported third quarter 2022 operating expense ratio was 2.4 pts higher than third quarter 2021. This increase reflects increased integration costs and a seasonally higher operating expense ratio related to the reinsurance operations acquired in December 2021, the return of advertising, travel, entertainment and other client-related expenses, as well as additional investments in technology. These expenses were offset in part by savings related to office consolidations and foreign exchange movements.
**	Adjusted third quarter 2022 operating expense ratio was 1.9 pts higher than third quarter 2021. This increase reflects the return of advertising, travel, entertainment and other client-related expenses, as well as additional investments in technology and a seasonally higher operating expense ratio related to the reinsurance operations acquired in December 2021. These expenses were offset in part by savings related to office consolidations.

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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):

Net Earnings to Adjusted EBITDAC (Non-GAAP)		3rd Q 2022	3rd Q 2021	9 Mths 2022	9 Mths 2021

Net earnings, as reported		$ 282.5	$ 253.6	$ 1,058.5	$ 845.6
Provision for income taxes		88.2	80.9	341.5	268.9
Depreciation		23.1	21.8	76.7	65.0
Amortization		111.1	90.8	332.8	300.2
Change in estimated acquisition earnout payables		(16.4)	34.1	(27.9)	59.9

EBITDAC		488.5	481.2	1,781.6	1,539.6

Net losses (gains) on divestitures		1.3	(4.3)	(2.9)	(8.9)
Acquisition integration		39.5	5.8	122.3	16.1
Workforce and lease termination related charges		6.8	3.9	21.1	13.2
Acquisition related adjustments		24.2	5.8	37.7	19.6
Levelized foreign currency translation		-	(8.1)	-	(26.0)

EBITDAC, as adjusted		$ 560.3	$ 484.3	$ 1,959.8	$ 1,553.6

Net earnings margin, as reported using reported
	revenues on pages 1 and 2	16.3 %	16.9 %	18.9 %	18.8 %
EBITDAC margin, as adjusted using adjusted
	revenues on pages 1 and 2	32.3 %	33.5 %	35.0 %	35.4 %

Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):

Organic Revenues (Non-GAAP)	3rd Q 2022	3rd Q 2021	9 Mths 2022	9 Mths 2021

Fees	$ 272.4	$ 245.9	$ 789.8	$ 703.2
International performance bonus fees	2.9	2.0	11.8	9.8

Fees as reported	275.3	247.9	801.6	713.0

Less fees from acquisitions	(1.3)	-	(10.6)	-
Levelized foreign currency translation	-	(3.6)	-	(9.7)

Organic fees	$ 274.0	$ 244.3	$ 791.0	$ 703.3

Organic change in fees	12.2 %		12.5 %

Acquisition Activity

3rd Q 2022

3rd Q 2021

9 Mths 2022

Arthur J. Gallagher & Co. Announces Third Quarter 2022 Financial Results